Retail magnate wants another round of stimulus

Retailer
Solomon Lew
has urged the federal government to undertake another multibillion-dollar stimulus package to kick start the economy and buoy the struggling retail sector.

The former Reserve Bank of Australia board member also lashed out at the central bank, accusing it of mishandling the mining boom and being out of touch while the rest of the Australian economy was going backwards.

Mr Lew called for an immediate 0.5 to 0.75 of a percentage point cut in interest rates to boost business and consumer confidence – despite the risk to inflation – and said employment was not growing in the eastern states and the only jobs being created were in mining .

“I really believe the Reserve Bank has mishandled the mining boom to the great detriment of the non-mining sector and particularly retail, which is one of the key drivers of economic activity,” Mr Lew said on Friday after disclosing a 2.3 per cent decline in January-half earnings at Premier Retail, which owns brands such as Just Jeans, Portmans, Peter Alexander and Smiggle.

“A bit of inflation can’t hurt and at this point in time market confidence needs to be rebuilt . . . the eastern seaboard as far as I’m concerned is completely frozen and the only jobs being created are in the west and that’s in the mining sector.”

Investors believe there is a one-in-four chance that the RBA will cut rates from 4.25 per cent when it next meets on April 3. The bank has left rates unchanged since December, despite calls for rate relief to boost consumer and business confidence.

Its board minutes indicate it believes the economy is growing steadily and inflation is under control, although it acknowledged some industries were struggling to increase profits.

Mr Lew said that when he was a member of the Reserve Bank board between 1992 and 1997, there were at least two retailers and one shopping centre landlord to provide feedback on retail conditions.

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“They could tell month by month what was happening. I’m not sure if they [the RBA] have that market knowledge today,” he said.

“I have a view that they’re not in touch with the market, they don’t understand where the economy is at, there’s a big danger in the amount of job loss and that’s put a dampener on the economy.”

The board has one member with a retail background, Roger Corbett, who was Woolworths chief executive and is chairman of Fairfax Media, publisher of The Weekend Australian Financial Review.

The federal government plans to cut corporate tax to 29 per cent from 30 per cent, funded by the resource rent tax. The Coalition, which opposes the mining tax, said it won’t vote for the corporate tax cut.

“We’re very determined that in this age of mining prosperity, a resources boom, that that money is shared around the country and shared by small businesses who struggle, who work hard, who give their fellow Australians a job and who deserve a tax break to help them do that,“ Prime Minister
Julia Gillard
said on Friday.

Mr Lew, who is Premier’s chairman, and its retail chief executive, Mark McInnes, blamed landlords and unions for store closures and job losses, saying rents could not keep rising as sales slumped, and wages should not increase without productivity gains.

“What [the unions] have to do is recognise all discretionary retailers are under pressure,” Mr McInnes said. “If they want to keep people employed, they have to create in the infrastructure of the agreements, whether they be EBAs or awards, ways for retailers to get some of those benefits back for any increase that’s given.”

Premier closed 28 stores in the January half, with more closures planned. It wants to make more of its casual staff permanent part-timers to ease wages pressure.

Myer
chief
Bernie Brookes
warned last week that he may close marginal stores on Sunday because of crippling penalty rates.